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IMPORTANCE OF ORDER IN TRADING



Today, we will understand some technical terms with respect to trading. It will be a short blog but very effective. The knowledge every beginner or enthusiast should have before starting to trade plays a vital role in future. So, understanding the difficulties faced during start of everyone’s career I am writing this blog to make sure every minute information gets easily absorbed by everyone.




 So, let’s begin with a short technical blog.

Trading plays a vital role for every user. To make it more efficient and fluid, there are certain Order types which helps users to customize their order as per their requirements.

Just take a look on these Order Types:


LIMIT ORDER


To understand this in a better way, let’s take an example.

Assume yourself as a Market maker or Trader. Now, you have a good amount for investment and you are not in rush. You have patience and can wait longer to get your trade executed. So, this is the best type of order you can use.

With this order type, you can set a limit to your bid amount. If you want to sell your bid at $100 only and don’t want to take risk then you can set a selling bid at $100 and wait for a buyer to buy it. It may take a longer time to execute but the risk of loss is almost 0.

Similarly, if you want to buy a bid at your desired amount then you can set it manually and wait for someone to sell it at that price. Once a seller is ready to sell his bid at the desired amount of yours, then automatically your trade will get executed. This is called a ‘LIMIT ORDER’.





MARKET ORDER


Market order are those types of order which is totally depended on current market prices. Here, you can’t manually input your amount.

To understand it clearly let’s take a situation.

Assume that you are in rush. You have limited time for trading and waiting. Here, you can use market order but you will suffer a difference in price. If, without analysis and Technical pre-requisite knowledge you trade, then there are higher chances of incurring a loss. In market order there is no opportunity to add manual inputs. The price is totally depended on current market price. Those who are in rush or don’t care for slight slippage amount then for them it is fine to deal with. A beginner should never use this Order to place his bids. It might be very risky as well as loss of asset.




Unlike Limit and Market Order, there is another type of order which is a little different from both of the above-mentioned orders.


Let’s welcome it! 😊



STOP-LIMIT ORDERS


The name has 2 modes, i.e. STOP & LIMIT. Here, stop price triggers the limit order and makes limit order to be placed in order book. Let’s understand it through an example;

Assume that you have certain type of cryptocurrency which you had bought at $150. Now, you want to sell it at a higher profit. So, you use Stop-Limit Order to execute it.

You manually set a Stop price higher than Market price. In this case, you have asset of $150 and your expectation is $165. So, you’ll set a STOP price at $155 and a LIMIT price at $165. As the market rises gradually, it will hit your STOP price first. As soon as it hits the STOP price, automatically your LIMIT ORDER will get triggered (Activated). Your limit price is $165. So, till then between STOP and LIMIT your orders will get filled. Once the Market Price rises above $165 then you won’t get your orders filled. To understand it more clearly click the image below and clear your doubts.


I hope these terms are now cleared for you. The in dept knowledge before trading is very important. So, try to read more on these topics. In future, there’ll be more related topics for everyone.

If you liked the blog, please share it with your friends. 😊

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